Last year I alerted you to the creation of a new
form of real estate transfer, the beneficiary deed.
This form of transfer has, as I expected, become
popular very quickly as a way to transfer real estate
to a person's successors without a probate and without
the potential problems of using a joint tenancy
deed. Because I have been getting frequent questions
about various possible uses of the beneficiary deed,
I decided that now would be a good time to revisit
the subject and to discuss the use of a beneficiary
deed for property with multiple owners and multiple
beneficiaries.
The beneficiary deed does for real estate what
the "payable on death" or "POD"
designation does for a bank account. It allows the
owner to designate a beneficiary for that asset
and creates a method by which ownership of the asset
will transfer directly to the beneficiary upon the
owner's death. The difference between a beneficiary
deed and joint tenancy is that with joint tenancy,
all of the joint tenants (owners) have a present
ownership interest in the property. With a beneficiary
deed, the beneficiary has no ownership interest
in the property until the present owner dies. This
means that the owner retains complete control of
the property while he or she is living, and the
beneficiary has no control over the property until
the owner dies.
A beneficiary deed can name one or multiple beneficiaries,
and can be given by one owner or multiple owners.
If there are multiple owners, all of them must sign
the beneficiary deed in order to transfer the entire
ownership of the property. If there are multiple
beneficiaries, the title can pass to the beneficiaries
in any legal form of ownership.
For example, a husband and wife who own a residence
as community property with right of survivorship
and who have two children can by a beneficiary deed
give the residence to the two children effective
only when both parents are deceased. The beneficiary
deed can specify that the beneficiaries (the children,
in this example) shall own the property as joint
tenants with right of survivorship or as tenants
in common. A beneficiary deed could also name a
husband and wife as beneficiaries and specify that
they are to own the property as community property
with right of survivorship.
A beneficiary deed may even be used to transfer
property to a trust. Ordinarily a person creating
a revocable living trust transfers their property
to the trust as soon as the trust is created, but
there may be circumstances where a person would
want to delay such a transfer until their death.
Using a beneficiary deed under those circumstances
would avoid the need for a probate transfer of the
property.
The law creating the beneficiary deed became effective
in August, 2001. A beneficiary deed will not be
the right method for everyone, but it can be an
effective way for many people to pass property to
their successors without the potential problems
of joint tenancy or the need for a probate proceeding.
